Nature of Business vocab Flashcards
Product
A good or service that can be bought or sold.
Business
The organised effort of individuals to produce and sell, for a profit, the products that satisfy individuals’ needs and wants.
Goods
Items that can be seen or touched.
Services
Things that are done for you by others.
Production
Those activities undertaken by the business that combine the resources to create products that satisfy customers’ needs and wants.
Other functions of business
Profit, employment, incomes, choice, innovation, entrepreneurship and risk, wealth, quality of life.
Profit
What remains after all business expenses have been deducted from sales revenue.
Revenue
The money a business receives as payment for its products.
Operating Expenses
All the costs of running the business except the cost of goods sold.
Income
Money received by a person for providing his or her labour, or a business from a return on its investments.
Wage
Money received by workers, usually on a weekly basis, for services they provide to an employer.
Salary
A fixed amount of money paid on a regular basis, usually fortnightly or monthly, to a permanent employee of a business.
Shareholders
People who are part owners of a company because they own a number of shares.
Dividend
Part of a business’s profit that is divided among shareholders
Choice
The act of selecting among alternatives.
Innovation
Either creating a new product, service or process, or significantly improving an existing one.
Research and development (R&D)
A set of activities undertaken to improve existing products, create new products and improve production.
Entrepreneurship and risk
The ability and willingness to start, operate and assume the risk of a business venture in the hope of making a profit. Risk refers to the possibility of loss.
Quality of Life
The overall wellbeing of an individual, and is a combination of both material and non-material benefits.
Classification by Size
Micro-business, Small, Medium, Large
Market Share
The business’s share of the total industry sales for a particular product.
Geographical spread
The presence of a business and the range of its products across a suburb, city, state or country or the globe. Local National Global
Industry
Consists of businesses that are involved in similar types of production. Primary, Secondary, Tertiary, Quaternary, Quinary.
Incorporated
Refers to the process companies go through to become a separate legal entity from the owner/s.
Sole Trader
A business that is owned and operated by only one person.
Unlimited liability
When the business owner is personally responsible for all the debts of his or her business.
Partnership
A legal business structure that is owned and operated by between two and 20 people with the aim of making a profit.
Incorporation
The process that companies go through to become incorporated, i.e. to become a registered company and a separate legal entity.
Limited Liability
A feature of corporate ownership that limits
each owner’s financial liability to the amount of money he or she has paid for the business’s shares.
Proprietary (Private) Company
An incorporated business and usually has between two and 50 private shareholders.
Privatisation
The process of transferring the ownership of a government business to the private sector.
Float
The raising of capital in a company through the sale of shares to the public.
Prospectus
A document giving details of a company and inviting the public to buy shares in it.
Venture Capital
Money that is invested in small and sometimes struggling businesses that have the potential to become very successful.
Business Environment
The surrounding conditions in which the business operates. It can be divided into two broad categories: external and internal.
External environment
Includes those factors over which the business has very little control. Economic, Financial, Geographic, Social, Legal ,Political, Institutional, Technological, Competitive Situation, Markets.
Internal environment
Includes those factors over which the business has some degree of control. Products, Location, Management, Resources, Business culture
Resources
Human, Information, Physical, Financial
Stakeholder
Any group or individual who has an interest in or is affected by the activities of a business.
Ecological Sustainability
When economic growth meets the needs of the present population without endangering the ability of future generations to meet their needs.
Business life cycle
The stages of growth and development a business can experience. Establishment, Growth, Maturity, Post-maturity.
Cash Flow
The money coming into the business in the form of cash receipts, and the money leaving the business as cash payments.
Merger
When the owners of two separate businesses agree to combine their resources and form a new organisation.
Acquisition (Takeover)
When one business takes control of another business by purchasing a controlling interest in it.
Vertical integration
When a business expands at different but related levels in the production and marketing of a product.
Horizontal integration
When a business acquires or merges with another firm that makes and sells similar products.
Diversification
When a business acquires or merges with a business in a completely unrelated industry.
Business Decline
Lack of demand for the product, failure to plan, increased competition, lack of adequate cash flow, poor location, lack of management skills, uncontrolled growth, failure to adapt to changes in the external environment, failure to price product correctly, unfavourable economic conditions, ignorance of existing competition, ill-conceived business idea, failure to meet customer’s needs.
Undercapitalisation
When there is a lack of sufficient funds to operate a business normally.
Voluntary cessation
When the owner ceases to operate the business of their own accord.
Involuntary Cessation
When the owner is forced to cease trading by the creditors of the business.
Creditors
Those people or businesses who are owed money.
Bankruptcy
A declaration that a business or person is unable to pay his or her debts.
Realisation
The process of converting the assets of business into cash.
Voluntary Administration
When an independent administrator is appointed to operate the business in the hope of trading out of the present financial problems.
Liquidation
When an independent and suitably qualified person - the liquidator - is appointed to take control of the business with the intention of selling all the company’s assets in an orderly and fair way in order to pay the creditors.
Receivership
Where a business has a receiver take charge of the affairs of the business. Unlike liquidation, the business may not necessarily end.
Insolvent
When a company is not able to pay its debts as and when they fall due.
